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tv   Street Signs  CNBC  November 12, 2013 2:00pm-3:01pm EST

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so are the airlines. the airlines have. pushing transports higher. the oil market is last traded on the downside by about 1% or so. so you're up to date. >> all right. sue, thanks very much. that will do it for another edition of "power lunch." thank you all so much for watching. >> have a great afternoon. "street signs" begins now. it is a big day on cnbc and we have a blockbuster hour on tap. live at the deal book conference for a rare, exclusive interview with billionaire hedge fund ken griffin. you cannot afford to miss that interview. are we at a market top or still time for you to get in? market all stars debate and another retailer heads to the front line in the war on thanksgiving. this one is also for the birs. robert franks has the new migration pattern of americas's
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elusive billionaires. welcome to "street signs." brian is off, fulfilling his civic duty, he is doing jury duty. but have no fear, folks, we have dominic chu here. we also have john fortt. we need a nickname for you maybe by the end of the show. >> together we'll be mandy's angels. >> i like that. >> i like being that. >> herb will join in as well. >> outstanding. >> riding shotgun. thank you very much. mild losses in the markets after the dow closed at another record high yesterday. it was its 35th record close of the year, but let's get down to bob pisani at the nyse. we've had a lot of fed talkers today, i'm just wondering whether or not it's really moved the needle here or because there are doves on one side and hawks on the other and all speaks out there, are they canceling each other out? >> not quite. the market is feel pressure on the interest rate sensitive side because the overall stock market has become hyper sensitive to talk about higher interest rates. the dow jones industrial average down today, dennis lockhart from
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the atlanta fed had given an interview about 11:30 where he came out and said a tapering could begin as early as next month. a lot of people weren't particularly to happy that. the markets moved to the downside. you have contrary opinions. the head of the minneapolis fed came out a short while ago and said tapering now would hinder the recovery so you're right, there's differences of opinion but it doesn't matter, the point is, interest rates are moving up. when the interest rate markets areas move up, the stock market gets under pressure. let me show you interest rate sensitive groups this month. the dow and s&p are down slightly on the month. look at this, reits, emerging marketses, housing stocks and telecomes are under pressure. emerging markets are a pressure, down for a week and a half. let me show you turkey, brazil, india, south africa. this is just this month, seven or eight trading sessions, that's what i mean. these interest rate sensitive
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groups are sort of the vanguard, the front of the concerns on higher interest rates and any time we start moving up on those rates these sectors come under pressure. back to you. >> thank you very much for that. bob pisani down at the nyse. as i said, it is a huge day here on cnbc. we've been hearing from some of the biggest names on wall street at the annual deal book conference in new york. kate kelly is there and kate, why don't you run us through the biggest headlines we've heard so far? >> i would love to, mandy. it's been a fascinating day here at "the new york times" building at the deal book conference and one of the highlights was andrew ross sorkin's one on one with dan loeb the founder and manager of third point which is one of the best performing hedge funds this year. he let us in on a secret sauce in terms of his ongoing bullishness on japan and specifically the stock sony. he's had trouble with sony while the stock has gone way up this year some of his activist measures haven't played out as expected. at the same time he said he's still bullish that economy and
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the stock let's take a listen. >> we remain bullish on japan. we wouldn't have made the sony investment if we didn't support abe and everything that they're doing, you know, politically, economically and from a monetary standpoint. >> now, moving across a couple oceans over to europe, there's also been some talk today about europe and france in particular. you may recall on friday, s&p downgraded france's debt from aa plus i believe -- from aa to one notch lower, but now there's a debate running as to whether their debt payments are going to make them as risky as some of the peripheral countries in europe. we've heard some information today about that from ray of bridgewater associates as well as larry fink of blackrock. they both are concerned about france but dalio had the sharper language. let's hear what he had to say
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about fraps and their debt service payments here. >> as debt rise faster than income which is continuing in france, and interest rates both the base rate and credit spreads have gone down a certain level they can't decline anymore there's going to be a rise in debt service payments in france. i think that in terms of changing the landscape, it's put france in the category of southern european countries. >> you know, pretty strong terminology coming from dalio one of the biggest money managers. finally speaking of big money managers, u.s. attorney in manhattan pa the rebharara speaking out since the $1.8 billion settlement his office reached with sac capital. he was asked with what's going on with steve cohen, whether he could be subject to future charges, whether it wasn't a loss that bharara was not able to charge him in this case. here's what he had to say on that score. >> as i said at the time of the
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guilty plea agreement, there's no coverage for criminal prosecution. there's no munity from criminal prosecution. and the criminal case generally speaking remains open. >> so in other words, no one can really breathe a sigh of relief in terms of sac or their individuals and as you know, mandy, they still have some other cases pending including with the securities and exchange commission. >> and kate, i'm going to put you on the spot here. we're minutes away from our exclusive interview with ken griffin. this is a rare interview. he doesn't often grant them. we're listening for what he has to say. can you give us a sneak preview of what we might likely hear? >> i have no idea specifically what griffin wants to address today, but i do know that he tends to be, when he does sit down for the interviews, quite candid and it interesting. one thing i might look for is that city dell is a huge competitor to sac and whether they're seeing a lot of resumes, the talent in their industry is
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being reshaped by the settlement. i would want to hear his macro economic outlook. we heard a bearish tone throughout the day on europe, as well as on the u.s. people thinking there could be a downdraft in the markets, also thinking the fed should start to taper as soon as december, at least in the case of larry fink. so i would look for griffin both on the macro points and also on the hedge fund industry. >> things to listen out for. again that's coming up in only a matter of minutes time here on cnbc with our own andrew ross sorkin. so folks, are we at a market top? joining us is art hogan, head of product strategy at lazard markets and our own, the columnist herb greenberg. great to have you both with us. dominic chu and john fortt are here to join in the conversation. herb, are we at a market top? >> well, i think we're certainly at a -- you better be careful part of this market. few weeks ago i was writing this was a greater fool's theory market. nothing has changed since then other than more ipos and i think
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we've had more reason for individuals certainly to think they're missing out on something really good. >> so you think we're at the point where we need to be careful, careful or start pulling out? what do you think? >> it's interesting. we've been at a point where we had to be careful probably, you know, 27 times over the last four years. we always go too far too fast and get concerned about a top. i think a long-term investor needs to step back and say what are my investment time horizons and the market will do next year, putting the fact that the s&p is up 23% this year and the nasdaq and russell are up 30%. what do we think about earnings next year and do stock look more attractive than bonds. that's the argument here. >> what's interesting, art, can i say one thing here, what art said is very interesting and one thing you have to factor into this, is the human nature part of it. art, what you're saying about long term, i think is fascinating but what we all know here is if those guys at the conference are talking bearishly perhaps about the market if we
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have another downdraft, who has the stomach to sit there and say it's okay, or to say okay this is the time to buy or is it a catching a falling knife. that's such a critical part of the ekwapgs of what's going on right now. >> art? >> herb, i only counter that with the fact that we've been -- people have been calling for a downdraft since the first quarter of this year when the market took off and up 8 or 11% in the first 30 trading days. what you have to be careful of is that assumption you need to wait to get involved in this marketplace if you're a long-term investor. if you waited for a pull back you missed it. you need to look at what your investment time horizon is and what you think 2014 will look like. there will be pullbacks, we will have multiple reasons for the market to pull back as of late but if you look at the pull backs we've seen this year, the only pullbackses have been in the 3 to 5% range. for those people waiting for 8 to 10% to catch that falling
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knife it hasn't presented itself. >> here's something we haven't talked about yet and maybe we should be talking about it, the markets will not fall because the central banks around the world won't let them. the fed is still involved and the european central bank cut interest rates this past week. so again, maybe art, i throw this to you, why are we talking about any kind of a pullback if the central banks won't let pullback happen? >> that's a great point except it if you look at where the market bottomed in 2009 to where it's come to here and for all the people that say the only reason that's happened is because of the fed or in spite of the fed, earnings and the market have movz almost to a percentage point the same amount. should we be concerned about the federal reserve being behind this market? absolutely. will the fed taper in december or march of this year? that's going to happen -- >> although -- >> yeah, herb. >> although the fed, with the fed not tapering we still have the ten-year bond much higher than it was when they started talking about tapering. so is the bond market sort of
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ignoring what the fed has to say. that's been one of bill neckenstein's theory and considering a short fund again. >> i want to throw two things at you which some say is a sign maybe we're at or nearing a top. so either agree with them or counter them depending on what you think. number one, when you see a front page ad or article saying the retail investor is back and unfortunately history shows that the retail investor often comes late to the party and number two, we have had a red hot ipo market. what do you think. >> both of those are true, mandy. if you look at the fund flow data you started seeing money coming out of the bond market into equity markets in august and september of this year. the exact same time we're talking about tapering. the retail investor may be late to this market. what you have to throw back at that argument is, is it too late for the next three years, not the last three years. we've seen significant gains in this market the last three years and what is the retail investor's alternative. should they be staying in a bond
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fund the next three years which is probably an easy answer, the other, you know, argument about the ipo market being red hot it is, and we haven't seen that ipo market like this since 2007. that said, the multiples of companies coming out at perhaps twitter are much more reasonable than the ipo market the last time it was red hot. more deals are getting done because market conditions are holding them. as a matter of fact that supply coming out is being met with buyers. there are certainly warning signs but doesn't mean it's today's business. you may be talking about something over the next 18 to 24 months you might want to start getting careful. >> let's put a bow on it. is this 1996 or 1999. >> interesting you pick those dates. 1996 when greenspan said we were exuberant. if you got out then you missed a couple attractive years. using a baseball analogy in the sixth or seventh inning, certainly not in the time to head back to the dugout yet. >> not quite at the top yet then. art and, of course, herb, always
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great to have you with us. still ahead, three big talkers. the thanksgiving retail wars, twitter's lack of analyst love and apple's big stealth move. plus, a cannot miss interview, citadel invest mpt's group live on cnbc. we found the cheapest gas in the nation and sharon epperson is on pump patrol. >> gas prices continue to fall around the nation particularly in the middle part of the country and that's where you'll find the cheapest gas. the lowest price for regular gasoline is in oklahoma. that's a suburb of tulsa. oklahoma is one of eight states around the nation where we are looking at prices that are below $3 a gallon for the national average. and this is happening mainly in the middle part of the country where they have greater access to refineries as well as a higher supply of gasoline. and we're also looking at the national average falling sharply day after day, a en epenny a da.
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$3.18 for the national average according to aaap. that's today's pump patrol. more on "street signs" after the break. ♪ ♪ on the road ♪ and we know that it goes on and on ♪ [ female announcer ] you're the boss of your life. in charge of making memories and keeping promises. ask your financial professional how lincoln financial can help you take charge of your future. ♪ ♪ oh, oh, all the way ♪ oh, oh
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welcome back to "street signs." i'm jackie deangelis. more on the u.s. airways amr settlement with the justice department. our phil lebeau just talked with u.s. air ceo doug parker and amr ceo tom horton about the settlement.
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u.s. air ceo's tell cnbc that synergies will be greater than $1 billion which is what we said it will be. amr ceo horton telling cnbc with the divestitures of slots, u.s. air will be larger at reagan than before the merger. they have not decided what routes to cut but smaller planes into smaller communities. they expect the merger to close in the first half of december. the latest we have on this story. back to you. >> thank you very much for that, jackie deangelis. i would like to show you a chart of what crude oil is doing. below $93 for a barrel and this is the first time since june. sharon epperson a moment ago was telling us about where we can find the cheapest gasoline around. i think it was $2.66 in oklahoma. a function of what's going on with crude as we can see it's been dropping for the last couple months and now below $93 a barrel. twitter hype losing steam, two analysts initiate coverage with a neutral rating. let's bring back herb greenberg on this. you've said there's a real tug
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of war brewing on wall street over this very newly public stock. >> you know, this is a fool me once for some of the analysts. they're not willing to accept the possibility that the stock goes much lower. they put a buy on it. what's interesting, pre-ipo you had about eight analysts come out and have buys on the stock. they're looking very good right now. then you have four over the past few days post-ipo with the equivalent of neutrals. one of my favorite from robert bear today, their analyst put like a neutral on the stock, initiate with a neutral and a target of 48. you have someone like susquehanna, this is interesting, a 50-pain report, a very serious 50-page report with a neutral. h he's saying these post-ipo or recommendations are saying, they think there's going to be a better time to buy the stock at a much lower price. whatever that entry point is, is anybody's guess. you just don't know if you're going to miss the opportunity, as art hogan was talking about,
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in the earlier segment. >> yeah. herb, i understand why a lot of these folks want to be pessimistic about the stock. a lot of times that's smart. but the data that i've seen recently that we brought you here on cnbc from adobe showing that engagement on twitter, the possibility of really amping up ads there is significant. that makes me think we could be in another situation where people aren't foreseeing the mobile revenue like with facebook and a lot of these naysayers could be wrong. >> i don't know that they're naysayers. all these people like the company. it's hard not to -- for those of us who use twitter hard for us not to see the opportunity, especially the disruption it could have in our business the news business. with some of these guys are seeing between here and what you're talking about john, whether a quarter or two quarters from now or four quarters the way wall street thinks, short-term mentality, all it takes is one quarter of things not being quite right and they won't get the amazon premium and still they'll get
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hit and then therein lies the opportunity to buy. if you go with a greater fool's theory at a lower price. >> a quick question here. herb, i understand that twitter will be added to the global index etf this week, possibly tomorrow, any impact ons the stock from that? >> no. no, i don't think from that. that one i think is pretty -- it's an index that's out there, social media stocks. it should be in there. that's been a pretty good etf actually. contrary to what i thought it would be. so no. i don't think that's going to have a big impact. >> always great to see you. guys, we're going to move on to stealth release from apple if just a moment's time. i would like to just keep you updated that any minute now, ken griffin of citadel, big hedge fund billionaire that rarely gives interviews will be sitting down with andrew ross sorkin in new york. that is coming up any minute now. back to what's going on from apple. a stealth release that's really crept up on a lot of people here and really uncharacteristic,
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isn't it, john? this is a quiet launch. it's different from apple in the way that they have in the past on a whole pile of fanfare, big release, lions out front. >> this is what everybody wanted. >> we always see the lions earn the block in central -- i mean, midtown manhattan. >> the tea leaves sort of suggest maybe they're having supply troubles. you've heard from the supply chain the smaller size screens are hard to come by. you have a high pixel density on those. and even in the release, phil schiller head of marketing said we're working hard to get as many out there as people want. maybe they didn't want people showing up and not being able to get their unit, if they do a soft launch don't get the lines around the block but manage to get these in people's hanss. >> holiday shortages for people who want to get their hands on it? >> probably shortages in the lowest storage range, which tends to be the most popular, willing to spring for 32 or 64
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gigabytes. >> the cheapest ones. >> the cheap ones go first. >> yeah. >> sorry. jump in. >> does that discourage people or make the them want it more? >> there's this window of time when the sales are there in the holidays as you know better than the rest of us, and if you aren't there with the product, when people want it or price they're willing to pay for it, you can lose those sales. it's not altogether a good problem to have. apple i'm sure is working really hard to get those components in place. >> what do you think of this new tradition at apple, because china, japan, and also hong kong are also in on this i pad mini launch. what does it say about what's going on at the company? >> those are now tier one countries, where a lot of the growth is. apple's having a lot of difficulty in china where there's at the same time a lot of opportunity because you've got these government news reports coming out that are critical of apple's customer service. you have sort of the exploding
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or electrocuting iphone charger rumors, so it's very xcomplicatd over there. apple trying to show china is important, beat back some of the negativism that's affected their sales. >> how important is it we talk about this because apple's hyper growth market when those iphones and ipads first came out was here but now they can find the next hyper growth market a place they haven't penetrated close which is china and maybe even japan. >> it's not as big an opportunity as you might think because of the size of the middle class and where apple is willing to go with the pricing of their product. i think that's creating a bit of difficulty for them too. >> and save margins that way. >> whatever happened to all those fake apple stores and had fake employees? whatever happened to them. >> that's a good question. i would like to go over and check that out. i'm sure they're still there at some level, though apple did try to beat them back. it's hard to stamp out the fakes over there. >> okay. john fortt, great stuff.
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we also would like to mention that out there live in new york, the deal book conference, our own kate kelly who's currently doing some chatting in the wings if you like with ken griffin. this is the ceo of citadel. big hedge fund billionaire. quite i don't know whether he's shiite or elusive. this is a -- he's shy or elus e elusive. we'll be listening in moments away make sure that you do tune in. okay. another big story today, the war on thanksgiving. walmart, announcing today its black friday deals will start at 6:00 p.m. on thanksgiving day. so let's bring in courtney reagan. we've often talked about how there is nothing sacred anymore. but on a business note, courtney, is this just going to bring sales forward or does it mean more sales, the fact that walmart is opening on thanksgiving with its black friday deals? >> seems to be it only shifts the timing of sales but it also changes who comes to the the store when. so the national retail
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federation has done extensive foerging and surveying and it seems it's that millennial shopper much more willing to go out on thursday night, hang at the mall, be with friends and potentially buy some stuff while they're there. they're much more willing to do that than get up at 2:00 in the morning. as the weekend goes on the shopper gets older. so some of the smarter retailers are making their doorbusters targeted. if you've got this teenage shopper, you're going to target them with your special on thursday. once they're out of the stores, what does mom want when she gets there friday? >> cardigans and sweaters go on sale. >> there you go. >> isn't part of this the shopping season is almost a week shorter too? they're just trying to start as quickly as possible. while had they might be pulling the sales forward, they've got fewer days to sale. >> we're six days shorter because of how thanksgiving falls so late. retailers will do whatever it takes, whenever it takes to get those sales and the thing is, it works. people show up to the stores. they tried it as an experiment level for a number of years and
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they pushed those opening hours and those door buster specials up and it works. people come. >> is there something to be said for the jewish high holidays are coming up close, close right around thanksgiving this time around. is there any perceived impact we could see holiday shopping on that front, augment what we would already see on a plaque friday? >>s there's been forecasts to determine how it will impact. the jewish holidays, the hanukkah season is earlier this year, coincides with thanksgiving, first time in 90 some years if i'm right. it's hard to say historically what typically happens. now, the population that celebrates hanukkah is a smaller population. but they're expected to spend 25% more than the regular holiday shopper. because of that -- >> guys -- >> i'm going to cut ouf there. we're going to throw out to the new york deal book conference where we're about to be witnessing a sit down interview between andrew ross sorkin of cnbc and citadel's hedge fund
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billionaire, ken griffin. let's listen in. >> ken, come on out. >> thank you, ken. >> andrew, great to see you. >> it is a treat to have ken here, he like so many people who have been here today, don't speak often that publicly and there's a lot of things i want to talk to you about. the markets, regulation, world of hedge funds, but i want to start on banks and i know you're not a bank, but i want to start on banks because we've had a number of people speak this morning, whether it be barry diller or larry fink or others, who have suggested that there is a place in the world for a big universal bank. they don't want to break up the banks. and the reason i raise this, is because we have talked over the past couple of years, and i suspect that you actually come to a very different conclusion about where we are with banks today. >> banking in america has become
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an incredibly concentrated industry. and whenever you see an industry that is as concentrated as banking has become, you see a dim min new ways in competition. we all know that primary driver of america's economic prosperity is the competitive dynamic between the various companies that comprise our economy. i think we have post-financial crisis or because of the financial crisis, taken an issue already concentrated and made it more concentrated and we created more universal banks in the united states, within these institutions we've reached a level of complexity that creates both management challenges, regulatory challenges, as we've seen recently compliance challenges. these are very difficult businesses to manage, given their sheer scale and size. >> is this for you, so you would
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break them up? just to put it on the table? >> we don't have a good legal justification for breaking up the banking system, but if i could wave a magic wand, i would break up the banking system. >> and you'd break up the banking system because you think they're too big to fail or too big to manage? >> they're both. they're bothp. >> and if you were to do it, how would you do it? >> so the first thing i would do is i would say, they got it right in the great depression. glass steagall makes a tremendous amount of sense. it's not appropriate for the securities trading operations in our country to enjoy the taxpayer support implicit in fdic insured companies. so the first thing i would do is pull the securities businesses out of the banking system. i would in a sense, debank goldman sachs and morgan stanley. i would make sure we enforce our
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deposit ceiling caps. bringing those caps down to foster the formation of more mid-sized banks that really are better positioned in many cases to compete for the local businesses demands for loans and other services. >> you know virtually nobody in the finance industry is saying what you're saying. why do you think you're coming at this in a different way? >> 23 years of experience gives a bit of a vantage point and seeing the industry consolidate over 23 years and the loss of competitive dynamics on the back of that, and then watching the populace anger directed towards all financial services over the last couple of years, makes me wonder why more people that sit closer to where i sit, don't want to put themselves outside of the taxpayer support position they're in today.
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could you imagine the populace outrage which would be well justified if the government once again had to interview to rescue our financial services companies, particularly the trading operations of our financial services companies. >> do you support occupy wall street? >> no. i don't. >> even though they come at this in a similar way? >> if you go through a number of the demands that they want to see changes around, a number that really aren't grounded in reality, but the overarching idea we should have our nation's capital markets pulled out of the banking system, makes a lot of sense. >> i'm going to try to channel, if i can, a combination of jamie dime, brine moynihan, the biggest banks in the country and
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they would say, the u.s. is the financial leader in the world. why in the world would you ever want to break up these banks where we are the clear leader. you know, in china there are going to be banks that are, you know, five times the size of any of our largest banks and going to create as much risk as anybody else and that we provide a service to our clients, what you always hear, over and over, you're a client of the bank, but always hear there are global companies, vodafone and verizon needed to borrow 50 billion, a great example of one of these instances, verizon needed to borrow $50 billion to buy out the chunk of verizon wireless it didn't own from vodafone and able to do this because it went to a handful of banks, two or three of the biggest banks in the country, and that was that. and we couldn't go around hat in hand to, you know, 50 different community banks asking for, you know, a billion dollars a pop. what do you say to that? >> well, the argument that we live in a world that's big banks
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are community banks is flawed. that's a flawed argumentp. but there is plenty of room for more mid-sized banks in the united states, banks that look something like a pnc would look like or first chicago would look like back in the day. there's a lot of room for banks of that scale and size. the arguments for the scale organizations have largely dissipated. technology used to be a really important part of the value proposition of scale to a large bank. but today technology has become so xhods tized that a mid-size institution has access to the same technology as a jpmorgan or bank of america for the purpose of running a commercial and consumer banking franchise. the idea that you need to have three banks able to put the $50 billion up for verizon, is in a sense called into question by the fact that back in the '80s
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the rgr deal was done with a large number of banks around the world. and that's a much more difficult credit to finance at that time in the context of that leveraged buyout than lending money to one of the strongest investment grade credits in the united states. >> you argue the competition point which is an interesting one and as a buyer of bank services that you are, talk about the competitive issue which is, if there was more competition, what do you think you would see that you don't see right now? >> well, that's one of the magic of competition, competition actually brings to the market goods and services that end users haven't even already thought of. think of apple and the iphone. did you ever realize that you wanted a handheld phone with a touch screen display that could provide all the services that your iphone provides you? that is the magic of competition is that these companies bring to you services that you can't even picture that you want today.
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but more tangibly for the american consumer more competition in the banking system would have meant lower mort again rates in the last couple years. the significant degree of concentration in the banking system, made american consumers pay more than they otherwise would have paid to refinance their house. it's a very simple example of how the everyday pocketbook of americans is being adversely affected by the extreme concentration that's emerged in the american banking system. >> you run a hedge fund investment firm. there was a period you wanted to become or add on an investment banking arm, correct? >> there absolutely was. >> and you decided not to do that. why not? i ask you that in the context of larger conversations about firms trying to get bigger rather than smaller? >> what we discovered in the course of time in which we offered corporate america advice is that we, as a firm, as a
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culture, are much more oriented towards acting as a principle than as an agent. there's a very big difference in skills and capabilities between firms that act as principals and firms that act as agents. the universal banks do both. i think they suffer in trying to do both. but we in a sense learned who we were and moved back to our core strength, our core economy it t -- competency. >> derivatives, outspoken in relation to dodd/frank. >> we're making progress, real progress in america. the movement of derivatives from being opaque, bilateral contracts that contributed materially to our systemic risk, to cleared transparent readily tradeable, readily assignable
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contracts, in clearing houses like cme, has been a material improvement in the stability of our financial system and a material benefit to the buy side user of these products who now enjoy much greater competition, much greater price transparency, tremendously lower counterparty risk and dramatically lower operational risk. >> what do you worry about? you used to worry about derivatives and used to think that's where this is going to blow up all over again? >> so today, one has to worry about the implications of so many years of such easy money. low rates have lured people into a sense of complacency around interest rate risks. and when inflation rears its ugly head, which it will do, the question is, is how many people will be caught flat footed with their interest rate exposures
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whether in their 401(k)s, their other savings retirements on the balance sheets of banks and our economy. >> you run a fund. how do you prepare for that moment and the problem has been, of course, that people have been saying that moment is going to come or -- for a very long time and it -- the timing matters more than even directionally knowing that will happen. >> the timing matters and what we saw back in may was when the fed discussed tapering, we saw the stock market brazil down 15%, we saw the stock market in thailand down 15%. on just the idea that we would reduce the scale of quantitative easing. so it's really important in the context of one's port follow to appreciate there is still an incredible amount of money that is very what we think of as hot money, chase your returns, taking significant risk, which has been encouraged by the fed's
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policies. i mean one of the explicit goals of the federal reserve bank has been to encourage people to take more risk. >> do you think it's working? >> it certainly has worked. if you look at the price of equities, homes, the price of financial assets around the world, the fed has been very successful at inflating the prices of financials. >> but that's exactly right. inflating the price of financial assets. i would argue it has worked to some degree at innating those who already own assets, but to the extent there is an inequality issue in this country it's made it a thousand times worse. >> not a thousand but certainly made it worse and that's a different question. the question posed was has the fed been successful at increasing risk taking, yes.
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retirement in a horrible way. >> as an investor, though, what's the right answer? what do you do? if i could name, you know, if janet yellen doesn't get the nod -- i think she will -- and we decide to put you in the post what's the answer? >> the fed is right. it's not as clear that the benefits of qe are outweighing the current costs. and i think that some of the dialog around being very firm and forward guidance, combined with tapering is the right dialog. we need to reduce both the reality and perception of the fed's intervention in long-term rates. i think that will do more to help real economic growth than most other things the fed could do right now. >> generally, where do you think we are in the economy? we've had a couple of different views just so you know, radalio thought over the next ten years, a return of maybe 4%. larry fink thought maybe we would be closer to %. where are you?
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>> in growth? >> what type of return you can expect in the markets today? >> so the interesting answer to that question is a bit more subtle. for the u.s. corporate sector to prosper going forward, we need higher gdp growth globally. that growth is going to be tied hand in hand to higher interest rates. so higher growth will drive revenues an drive profitability but higher interest rates will have an effect of pushing stock prices down. if i can pick four, i would pick four on a forward looking basis over the next ten years. >> what do you do? >> because you need to do a lot better than four. >> so we don't try to profit from calling the direction of the stock market. we try to profit from picking individual companies that are going to outperform expectations
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of success. we're in the single stock story, which companies are going to have winning products, winning value propositions, that are going to create wealth for their shareholders that the rest of the market is not anticipating. >> final question and then we'll open it up to the audience. we had preet bharara up here and we talked about sac capital and steve cohen. there is a cloud somewhat, i don't know if you thinks there's a cloud, over the entire industry or just that particular firm but i wanted to get your thoughts on what's taking place at sac and what it means to the rest of your business? >> so clearly steve cohen is facing one of his darkest moments and there's no doubt
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about insider trading of the employees at sac is something that i know strikes very much at the heart of that firm. it's been a really difficult period of time for them. and i think it's unfortunate that the culture there allowed not one rotten apple but a couple rotten apples and i do believe that this has put a bit of a dark cloud over the entire industry. it's not just about sac. it's about the fact that the government has brought about 50 insider trading cases successfully over the last couple of years and it's a very sad statement about how some of the best and brightest in america have chosen to bend the rules for their own benefit. it's not limited, though, just to insider trading. we look at the fixing scandal, the curtain investigation of foreign exchange manipulation, there's a real statement here at
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play. there's a statement that wall street needs to do a better job of having a culture that represents the values of our country. >> so what do you think it is about the culture? >> i think that there are a number of forces at play, in particular on wall street, there's been a bit of a cartel mentality built up over the years. when you have a very small number of players it's easy for firms to start to impolice this and explicitly coloud. that's at the heart of some of the scandals unfolding and that speaks to the negative effects of undue concentration and a lack of competition. >> okay. >> okay. >> and on the hedge fund side, look, there are tens of thousands of people involved in working at hedge funds. what is really remarkable is how
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successful the governments has been at uncovering the rotten apples that exist in our industry as exist in other industries. but that doesn't excuse our industry from what has happened. it speak to the fact that the leaders in our industry really need to focus on through the tone from the top, a focus on s the importance of not just following the letter of the law but the spirit of the law. >> has it changed anything at your firm? >> no. my general counsel has been extraordinarily bold and aggressive on making the points i just shared with you, for the ten years he's been with me at citadel. he's done a fantastic job of making sure that my colleagues really appreciate the importance that we place.
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>> ma'am, over here. >> hello. back to your point regarding populace outrage. you go back to senator lev vip's comments earlier this morning saying we need more dodd/frank. dodd/frank is the best thing that's ever happened, contrasted with a number of the panelists who have said and i think accurately so, that, you know, the regulations have not -- not just dodd/frank, we have not adequately addressed the actual drivers of what brought down the economy in the early 2000s. i really -- i would love to hear from you what you think particularly in the private fund space, we can do to i think there's a fundamental disconnect between what the, you know, the popular everyday guy, the family that's got, you know, that's looking to invest and, you know, their idea of our industry versus, you know, what we really do. in their eyes goldman sachs, tpg, carlisle are all the same thing. how do we adequately address
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this fundamental disconnect? is it a pr? the answer, you know, better pr? what is it? >> what should the industry from your perspective on behalf of the industry what's supposed to happen? >> that's a great question. it really is a great question. because it's such a complex question and i'll speak to it broadly. dodd/frank is a really mixed bag. there are a lot of very important and powerful and constructive paradigms in dodd/frank. for example, moving derivatives to clearing houses, which create more transparent and fair markets. the consumer protection part of dodd/frank is well intended, but it also takes away consumer choice. and i had think that's a material flaw in the framework of dodd/frank. we've moved away from a structure of making sure consumers are adequately and fairly informed of their
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choices, to a structure where consumers just don't have a choice. and i think that's a real setback for financial services. i think one of the challenges that we have right now is an industry, is the fed's policies have been really supported to our industry in a really clear and powerful way. it's to help the private equity firms with their portfolios, the hedge fund managers with their portfolios, the bank rebuild their balance sheets, where we've seen the wealthy in america become wealthier. and the fed hasn't done this to help our industry. they've done this to try to help our economy. the fed has been facing a real significant headwind on the battle to improve growth on america. which has been the very poor policies out of washington. for all the work the fed has done to try to reaccelerate our economy which has unduly helped wall street, the weight of the
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regulatory burdens out of washington, the increasing power of labor granted by washington, has put a real damper on growth in america. so what we need to put our country back on the right footing, is both for washington to embrace pro growth policies in the white house and in the congress. combined with the fed's very lax policy towards product creation and easy money. we need both of those oars in the water to move the ship forward in the right direction. but right now, what we see is we really see wall street benefiting disproportionately from the total wealth creation pie in america. >> why don't we try to stick one last question in. yes, sir, right here. >> you and i live in a city and a state drowning in pension debt. >> so we're both from illinois. >> many other states and cities are in the same spot, so i'm giving you back your magic wand.
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what do we do to help the overleveraged cities and states get out of that problem over the long term? >> so the state of illinois has in rough terms about $200 billion of unfunded pension liabilities. which means we're going to break our promises to the stated employees who have worked for their entire life for the state of illinois for many cases. in fact, there's already 10,000 state employees in our state who receive pension plan payments over $100,000 per year. and they're going to see those promises broken in the years to come. now, we talk a lot about the dysfunction in washington, the partisan battle between the republicans and democrats. our great city of illinois, we don't have such a battle. we have a super majority of democrats controlling the house. the democrats resoundingly control the senate that govern the states and democrat. we have a case study of what it looks like when you have one
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party completely in control of a state. and the case study in illinois says, we do nothing to fix the problems at hand. pension reform is desperately needed in illinois. and pension reform has not been forthcoming, which simply means that when the day of reckoning occurs, the unfairness to the employees that have worked for the state will be all the greater. you know, if you're a young fireman or police officer or young teacher, you're contributing to a system that will unquestionably be bankrupt. you are spending years of your life in service to a state that will unquestionably not honor its obligations to you. and the longer we push off reform, the worse it's going to be. we'll end up in a situation like detroit which is horribly wrong. >> on that horrible note i want
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to thank ken grimpb fffin for b here. >> he came out swinging. he immediately said he would break up the banking system. what was your main takeaway? >> i'm sort of picking up my jaw off the floor. that was quite an indictment of griffin's own industry, structure, practices. among other things he basically -- he didn't basically. he said wall street had had a cartel mentality over the years. especially almost saying there was some truth to the allegations that federal prosecutors had made of insider tradi trading, s.a.c. and other firms. he said this is clearly a dark time for s.a.c. and for all of us. he says the banking system should be broken up and the idea of community banks versus huge super banks is a dichotomy and people should only do what they do well. finally, this is interesting, he said after everything we've been through and the pop list
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outrage, i'm shocked more people in my position don't want to eskew taxpayer assistance. he was absolutely fascinating, candid and really harsh on his own industry. >> candid was certainly the word coming to my mind as well. it was a really great interview. kate kelly, thank you for that. during the "closing bell," the next show on the slate at cnbc, we have elon musk, tesla ceo, which is going to be interesting considering shares of tesla are down nearly 30% since hitting their record high of 194 bucks. up on this show, more on the big trop in oil and my grading billionaires. [ female announcer ] it's time for the annual shareholders meeting.
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♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪
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crude oil, wti settling down at 93.04, the lowest since may 31st. the ever elusive billionaire, in fact, he or she is quite the migratory creature and robert frank has been studying them as well. >> they increasingly fly in
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flocks to the same events around the world depending on the season. mass migration of the super rich so we decided to take i on a tour of the annual journey. starts in u.s. at-n miami at art basel where they buy up hundreds of millions of art, do clubbing, vip dinnerers, pooling parties. now year calls for new location so the wealthy head south to the caribbean to st. barts, russian billionaire is a fix there as well as paul allen. in january they get a little more serious, cross the atlantic and go up to davos, switzerland, for the world economic forum will bill gates, george soros and others gather to plot the future of the world and lots of google-sponsored cocktail parties. in may it's south down to the mediterranean for fun, sun and
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hobb-knobbing with celebrities, brad and angelina, leonardo for the cannes film festival. lots of yachts there. ron perlman, i'm told, hosts the best yacht party. in september it's back to the u.s., back to business in new york with the clinton global initiative, philanthropy conference where they gather, figure out how to save the world. as one billionaire told me, it's like a community. you see the same people. it's just the back drop that changes throughout the world. >> pretty nice backdrop, indeed. come sit down, robert frank, because we -- >> that robert story made me feel so fly like a g-6. that's all i got to say. >> you've already upgraded from the g-5. >> apparently i can't find a g-6 if i wanted one, right? >> that's why they flip them, isn't it? >> exactly. it's interesting. it shows how it's this more
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self-enclosed culture, the circuit of the same people, the same parties but the back drop changes. these events are very lavish so you get all the escolades, yachts, a moveable feast. >> do they have an ecosystem that follows them? >> oh, absolutely. >> their entourage. >> what business follows them from place to place? butler convention or entourage? >> if you read the web story, which is on today, which i hope you will, it talks about all the economy, the giant economy, the financial firms, the sponsors, the champagne companies, so, there is this whole economy, plus the entourages, nannies, trainers, art advisers. it is like a traveling circus of -- >> how much kristol can you brink? >> that's my next assignment. >> i was was saying migaratory
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wrong. "closing bell" is coming up next. elon musk interview, do not miss. hi, everybody. welcome to the "closing bell." i'm maria bartiromo coming from the schwab impact conference in washington. financial advisers are watching this market closely as there is word the federal reserve could, in fact, taper as soon as next month. bill, what are the odds? >> yeah, well, we've heard it from a super dove, which was very interesting development there. we'll talk about that, maria. i'm bill griffeth at the new york stock


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